TOKYO Nov. 11, 2020--S&P Global Ratings today said it has revised to negative from stable its outlook on the 'BBB+' long-term issuer credit rating on Japan-based finance company Ricoh Leasing Co. Ltd. At the same time, we affirmed the 'BBB+' long-term and 'A-2' short-term issuer credit ratings.
Our revision of the outlook on Ricoh Leasing to negative follows the same action on its parent company, Ricoh Co. Ltd. (BBB+/Negative/A-2), a Japan-based imaging and optical products maker (see "Ricoh Outlook Revised To Negative On Expected Slow Recovery; 'BBB+/A-2' Ratings Affirmed," published Nov. 10, 2020). We base our outlook revision on Ricoh on our views that the company is more likely to make a large operating loss in fiscal 2020 (ending March 31, 2021) amid COVID-19 and that a recovery in performance in the next fiscal year and onward may take longer than we assumed.
We think the ratings on Ricoh group companies continue to affect our ratings on Ricoh Leasing because it is dependent on the group for a relatively high proportion of its revenue, while the 'bbb+' stand-alone credit profile (SACP) remains equal to the group credit profile for the Ricoh group. Under our group rating methodology, we assess Ricoh Leasing as a strategically important entity of the Ricoh group. We believe the company is important to the group's strategy because of its key role in offering domestic sales financing for Ricoh's products and because Ricoh still holds more than a third of voting rights in Ricoh Leasing as its largest shareholder.
The negative outlook on Ricoh Leasing reflects our negative outlook on Ricoh. We might downgrade Ricoh Leasing if we lower our ratings on Ricoh. We might also downgrade Ricoh Leasing if we revise downward the SACP. This could occur if we come to believe prospects for sales of Ricoh's products have deteriorated, potentially weakening Ricoh Leasing's revenue base. It could also occur if we expect Ricoh Leasing's risk-adjusted capital (RAC) ratio to fall below 15% due to an increase in equity investments.
Conversely, if we revise upward the outlook on Ricoh to stable, we are likely to take the same action on Ricoh Leasing.